Even rumors did not forgive Lucent Technologies Inc. last week as the telecom equipment maker scrambled to reassure its nervous investors that it was not doomed to bankruptcy.
“The rumors that Lucent is filing for bankruptcy are baseless and irresponsible,” said Deborah Hopkins, the company’s chief financial officer as the company’s stock rebounded from a 52-week low, affording the company a respite from recent bad news which have included takeover rumors and fear of a slide to junk status.
The bankruptcy rumor was also compounded by a Wall Street Journal report that Morgan Stanley, an investment company that had just bought the bulk of Lucent’s spinoff Agere, planned to cut 1,000 brokers. Morgan Stanley also denied the report.
In spite of its denial, Lucent announced an additional downsizing of 1,000 workers, showing that it was still grappling with the series of financial and strategic foibles that have placed it under siege in the past six months.
But Lucent still displays a semblance of self-confidence.
“Let me be very clear,” emphasized Hopkins, “our $6.5 billion lines of credit provide the financial resources and the financial flexibility to execute our turnaround plan.”
She promised her company will provide a detailed report in its second quarter fiscal report later this month.
“If Lucent survives the next nine months,” said Marc Liggio, vice president of broadband research for Allied Business Intelligence, “it probably will not descend into junk status.”
Liggio said Lucent is not a dotcom or a software company, but noted that the company is reeling from a dislocation caused by spinoffs and acquisitions, which were worsened by its accounting errors and the shadow of an economic slowdown.
Standard and Poor’s warned last week that it may cut its credit ratings, which is close to junk status.
Liggio said the spinoff of Avaya, its enterprise group, caused a short-term problem and it did not recover before the economic woes hit.
Agere, which is the company’s microelectronics division, has had problem because its chipsets were behind schedule.
Agere has been suffering from losses since last year and Lucent sold 600 million shares as part of the move to boost its initial public offerings.
Liggio, however, believes that Lucent has great relationships in the market and “its equipment works,” noting that the company is too big to disappear.
“Who is going to end up owning it,” he asked, saying that “there is too much there for the company to break up and build up from the scratch.
He, however, cautioned that 3G throws up a lot of permutations that make the industry hard to predict three or four years down the road, especially with the amount of money that carriers have paid for spectrum.
Many Wall Street analysts think that, in the short-term, Lucent’s turnaround will depend on the fortunes of Agere.
